Encouraged by the third-quarter report, several analysts raised their estimates for the rest of the year and reiterated buy ratings, although Microsoft's fiscal 2005 guidance was mixed, with revenue short of estimates but earnings exceeding them.

"We reiterate our outperform rating on MSFT shares and believe that the next three to six months present a buying opportunity ahead of what we believe are three major catalysts," Piper Jaffray analyst Gene Munster wrote in a note Friday. He cited a likely dividend increase in July, an improvement in deferred revenue and anticipation of the next release of Windows, due out in 2006.

"Long term, we expect investor anxiety related to Microsoft's growth potential will ease as the company delivers on fiscal 2005 targets," Munster added. (Piper has not done banking with Microsoft.)

Meanwhile, a smaller-than-expected decline in the closely watched deferred revenue line -- a measure of subscription sales -- also boosted investor confidence. "This is music to the ears of investors who have been concerned about the decline in unearned revenue over the past few quarters," wrote Friedman Billings Ramsey analyst David Hilal, who has an outperform rating on Microsoft. (His firm hasn't done banking with Microsoft.)

Unearned, or deferred, revenue fell about $326 million to $7.53 billion from $7.85 billion at the end of December. That was a smaller decline than the $500 million drop expected by analysts.